Question
On January 1, 2016, Uncle Company purchased 80 percent of Nephew Company's capital stock for $606,400 in cash and other assets. Nephew had a book
On January 1, 2016, Uncle Company purchased 80 percent of Nephew Company's capital stock for $606,400 in cash and other assets. Nephew had a book value of $735,000 and the 20 percent noncontrolling interest fair value was $151,600 on that date. On January 1, 2015, Nephew had acquired 30 percent of Uncle for $349,000. Uncle's appropriately adjusted book value as of that date was $1,130,000.
Separate operating incomefigures (not including investment income) for these two companies follow. In addition, Uncle declares and pays $30,000 in dividends to shareholders each year and Nephew distributes $4,000 annually. Any excess fair-value allocations are amortized over a 10-year period.
Year UncleCompany NephewCompany
2016 $117,000 $41,400
2017 124,000 56,400
2018 204,000 64,600
- Assume that Uncle applies the equity method to account for this investment in Nephew. What is the subsidiary's income recognized by Uncle in 2018?
- What is the net income attributable to the noncontrolling interest for 2018?
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